Look North, West and South, but East is still the Best–Time to look within at Malaysians


October 3, 2018

Look North, West and South, but East is still the Best–Time to look within at Malaysians

Image result for Mahathir and Shinzo Abe

by Amb (rtd) Dato Dennis Ignatius

http://www.freemalaysiatoday.com

Not many people were surprised when Dr Mahathir Mohamad revived his Look East Policy. He has always admired the Japanese work ethic as well as the way they were able to rebuild their nation after the devastation of World War II. Of course, Japan’s accomplishments have been phenomenal and there’s much we can learn from them.

Corrupt officials with name tags

Cynics will, however, wonder whether anything qualitative has come out of the whole effort to learn from the Japanese, at least in so far as the civil service is concerned.

Civil servants come to work on time with the clock-in system and are readily identifiable by their name tags, but has it made them more productive, more committed to public service, less corrupt? Judging from Mahathir’s own harsh remarks about the civil service, it would seem that the answers to all these questions are a resounding no.

In fact, successive Prime Mnisters have complained about the civil service but all have been quick to also praise them (and raise their salaries) for fear of antagonising an important vote bank.

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We also spend millions, year after year, on civil service training programmes, and send civil servants abroad to study. Much of it is simply a waste of time and money.

Clearly, transplanting Japanese work ethics into the civil service, if it’s at all possible, is going to take a lot longer to realise. However, the experience of other countries when it comes to the civil service may be instructive: where there is uncompromising enforcement of rules and performance standards and a really transparent and competitive promotion system, public servants tend to perform better. The prospect of losing their jobs or being denied promotion is a powerful incentive to keep civil servants honest.

Thus far, there have been lots of complaints about the civil service but little sign of a serious attempt at reform. The rot has spread so wide that no one seems to know where to begin. The recent appointment of a new chief secretary is a step in the right direction but unless there is a commitment to undertake a radical overhaul of the civil service and the way it operates, we are not going to see the kind of qualitative improvements that our nation desperately needs.

Why Look East?

But why look East and not within in the first place? In his speech to the Associated Chinese Chambers of Commerce and Industries of Malaysia (ACCCIM) in July, Mahathir himself noted that “the Chinese were the driving force behind generating wealth in Malaysia”. He went on to say that, “Our country is what it is today because of the contribution from the business community, especially the Chinese community because they are dynamic in many ways.”

He then called for a collaborative effort (presumably with ACCCIM and the Malaysian Chinese business community) to lessen income disparities so that everyone could share in Malaysia’s prosperity. It was not the first time that Mahathir has mooted such an idea.

Is renewed interest in the Look East policy a reflection of Mahathir’s disenchantment with the inability of Malaysian businessmen to work together? Is he looking East because he has not been able to look within?

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It’s a provocative question, no doubt, but it deserves some attention. In the past, such collaboration may have been difficult – you can’t demonise a community and then expect it to be helpful – but with a new government in power it might be time to seriously look at ways to get more Malay and Chinese businessmen to work together. The government’s plan to privatise some of the GLCs might, in fact, provide opportunities for such collaborative efforts.

Waiting to be wooed

In the meantime, buoyed by Pakatan Harapan’s election victory and hopeful of a more inclusive future, many Malaysians are returning home. We must find ways to tap the expertise, skills and connections of all Malaysians wherever they are.

Some Malaysians living abroad, however, are waiting to be wooed. One group of them recently urged the government “to form a special panel to woo those living there to return home and join government-linked companies to contribute to the development of a new Malaysia”. They also asked the government to “provide incentives and remove certain restrictions to encourage them to come back”, to quote one report.

If they need to be “wooed” to come home or if they need “incentives” to move back (and to work in GLCs at that), they are better off staying where they are. After all, thousands of Malaysian students return home each year without asking for incentives.

Just ask Yeo Bee Yin, our Minister of Energy, Green technology, science, climate change and environment; she didn’t need incentives to come home to serve her country. It is good that she is now in a leadership position.

 

Dennis Ignatius is a former ambassador.

The views expressed are those of the author and do not necessarily reflect those of FMT.

 

Southeast Asia: Changing Geo-Political Dynamics in the Trump Era


August 30, 2018

Southeast Asia: Changing Geo-Political Dynamics in the Trump Era

Widespread reports of China’s hegemony over the neighboring region miss the nuance of fast-shifting political and strategic dynamics

Phnom Penh 
A historical map depicting China's flag over Southeast Asia. Photo: iStock

Is China truly establishing dominance over neighboring Southeast Asia, or is it a prevailing perception among academics and journalists who have uncritically adopted a pervasive pro-China narrative built on Beijing’s rising investment and influence in the region?

Two recent Southeast Asian elections denote a shifting spectrum. Last month’s general election in Cambodia, by far China’s most loyal ally in the region, was taken by some as indication of how far the country has moved away from its past Western backers and closer to Beijing.

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As Cambodia abandons multi-party democracy for one-party authoritarianism, similar to the dominance of the Communist Party in China, some see Cambodia as the first domino to fall in China’s grand regional ambition for political and economic control over the nearby region.

Indeed, some in Cambodia’s exiled opposition have claimed that the country has become a de facto “Chinese colony” under Prime Minister Hun Sen’s ruling Cambodian People’s Party (CPP).

The Harapan coalition’s win at Malaysia’s May 9 general election, however, pointed in the opposite direction. The long-ruling United Malays National Organization (UMNO) was ousted by an alliance whose campaign narrative was built in part on opposing Chinese investment, which boomed under the previous government.

Now as prime minister, Mahathir Mohamad has cancelled US$22 billion worth of Chinese-backed infrastructure projects, including a Belt and Road Initiative-inspired high-speed rail line, for reasons of fiscal prudence.

While Mahathir warned of the risk of new forms of “colonialism” during a recently concluded tour of China, he also made the diplomatic point that his government isn’t anti-China.

Indeed, some in Cambodia’s exiled opposition have claimed that the country has become a de facto “Chinese colony” under Prime Minister Hun Sen’s ruling Cambodian People’s Party (CPP).

The Harapan coalition’s win at Malaysia’s May 9 general election, however, pointed in the opposite direction. The long-ruling United Malays National Organization (UMNO) was ousted by an alliance whose campaign narrative was built in part on opposing Chinese investment, which boomed under the previous government.

Now as Prime Minister, Mahathir Mohamad has cancelled US$22 billion worth of Chinese-backed infrastructure projects, including a Belt and Road Initiative-inspired high-speed rail line, for reasons of fiscal prudence.

While Mahathir warned of the risk of new forms of “colonialism” during a recently concluded tour of China, he also made the diplomatic point that his government isn’t anti-China.

Malaysia's Prime Minister Mahathir Mohamad (L) and China's Premier Li Keqiang talk during a signing ceremony at the Great Hall of the People in Beijing on August 20, 2018.Mahathir is on a visit to China from August 17 to 21. / AFP PHOTO / POOL / HOW HWEE YOUNG

“We should always remember that the level of development of countries are not all the same,” Mahathir said this week at a joint press conference with Chinese premier Li Keqiang. “We do not want a situation where there is a new version of colonialism happening because poor countries are unable to compete with rich countries, therefore we need fair trade.”

It is undeniable that China now plays a major and growing role in Southeast Asian affairs, even if judged by only its economic heft.

A recent New York Times report noted that every Asian country now trades more with China than the United States, often by a factor of two to one, an imbalance that is only growing as China’s economic growth outpaces that of America’s.

With China’s economic ascendency projected to continue – the International Monetary Fund (IMF) predicts China could become the world’s largest economy by 2030 – some believe that Beijing aims to replace the US-backed liberal international order in place since the 1950’s with a new less liberal and less orderly model.

Cambodia’s case, however, tests the limits of that forward-looking analysis. The US and European Union (EU) refused to send electoral monitors to Cambodia’s general election last month on the grounds the process was “illegitimate” due to the court-ordered dissolution of the country’s largest opposition party.

Washington has since imposed targeted sanctions on Cambodian officials seen as leading the anti-democratic crackdown, while new legislation now before the US Senate could significantly ramp up the punitive measures.

Hun Sen aired a combative response to threats of sanctions, saying with bravado that he “welcomes” the measures. Some commentators read this as an indication that Phnom Penh no longer cares about the actions and perceptions of democratic nations because it has China’s strong and lucrative backing.

Yet the CPP still made painstaking efforts to present a veneer of democratic legitimacy on to its rigged elections, something it would not have done if it only cared about Beijing’s opinions. Hun Sen now says he will soon defend the election’s legitimacy at the United Nations General Assembly, yet another indication that he still cares what the West thinks.

China’s rise in Southeast Asia is viewed primarily in relation to the US’ long-standing strong position, both economically and strategically. Many see this competition as a zero-sum game where China’s gain is America’s loss.

Along those lines, some analysts saw US Secretary of State Mike Pompeo’s recent whirlwind trip to Southeast Asia as “parachute diplomacy” that only underscored certain entrenched regional perceptions of the US as an episodic actor that has no real strategy for Southeast Asia.

The Donald Trump administration certainly lacks an overarching policy comparable to his predecessor Barack Obama’s “pivot to Asia,” a much-vaunted scheme with strategic and economic components that made Southeast Asia key to America’s policy of counterbalancing China.

Despite no new policy moniker, Trump’s administration has in many ways continued Obama’s scheme: Vietnam remains a key ally, support for other South China Sea claimants is unbending, military sales remain high, and containing Chinese expansion is still the raison d’etre.

It’s also been seen in the number of visits to Southeast Asia by senior White House officials, including high profile tours by Pompeo and his predecessor Rex Tillerson, Defense Secretary Jim Mattis, and Trump himself to Vietnam in November 2017 and Singapore in June.

A little noticed December 2017 National Security Strategy document, produced by Trump’s White House, explicitly notes that “China seeks to displace the United States in the Indo-Pacific region, expand the reaches of its state-driven economic model, and reorder the region in its favor.”

Yet perceptions of new Cold War-like competition in Southeast Asia often fail to note the imbalance between America and China’s spheres of influence in the region.

 

US President Donald Trump (L) and Vietnam's President Tran Dai Quang (R) attend a welcoming ceremony at the Presidential Palace in Hanoi in Hanoi on November 12, 2017.Trump told his Vietnamese counterpart on November 12 he is ready to help resolve the dispute in the resource-rich South China Sea, which Beijing claims most of. / AFP PHOTO / POOL / KHAM

Absent President Donald Trump’s Asia Policy, China emerges as the dominant  player in Southeast Asia

China’s two most loyal regional allies are arguably Cambodia and Laos, countries of less economic and strategic importance than America’s main partners Indonesia, Thailand, Singapore and Vietnam.

The historically pro-US Philippines has gravitated somewhat into China’s orbit under President Rodrigo Duterte, though at most there has been an equalization of its relations between the two powers rather than outright domination by China.

Strategic analyst Richard Javad Heydarian recently noted that Duterte likes to think of himself as a “reincarnation of mid-20th century titans of the so-called Non-Aligned Movement,” though Heydarian suggested that this could prompt a backlash from the Philippine public that remains resolutely pro-America.

Malaysia, another country that was thought to have been moving closer to China, has ricocheted strongly in the other direction after the change in leadership from pro-China Najib Razak to China-skeptic Mahathir Mohamad.

Thailand has boosted military ties with Beijing since the country’s military coup in 2014, which caused some panic in Washington, but a recent incident has shown just how fragile their bilateral relations remain.

After two boats sank near the resort island of Phuket in early July, killing dozens of Chinese tourists, Deputy Prime Minister Prawit Wongsuwan blamed the Chinese tour operators, commenting the accident was “entirely Chinese harming Chinese.”

His claim led to calls in China for tourists to boycott Thailand, which could cost the country roughly US$1.5 billion in cancellations, according to some estimates. Thailand’s tourism sector is now facing a major public relations problem after China’s jingoist state-owned media lambasted Prawit’s tactless response.

More explosively, rare nationwide protests in Vietnam in June were sparked by nationalistic concerns that a new law allowing 99-year land leases in special economic zones would effectively sell sovereign territory to China.

There are strong perceptions, aired widely over social media, that Vietnam’s ruling Communist Party is too close to Beijing, a cause of resentment that some analysts suggest is the country’s biggest potential source of instability.

Even in perceived pro-China nations like Cambodia and Laos, anti-China sentiment is rising in certain sections of the public. Arguments that Chinese investment actually harms the livelihoods of many Cambodians, especially in places like coastal Sihanoukville and Koh Kong, is on the ascendency.

Social media criticism has centered on a concession deal the Cambodian government entered with a Chinese company that effectively gives it land rights to an estimated 20% of Cambodia’s coastline.

The same goes for Laos’ ruling communist party, which has taken steps to curb the growth of certain sectors dominated by Chinese investment, such as banana plantations and mining, over public complaints about their adverse health and environmental impacts.

The IMF and others, meanwhile, have expressed concerns that Laos risks falling into a Chinese “debt trap”via its Beijing-backed US$6 billion high-speed rail project, a claim that Prime Minister Thongloun Sisoulith felt the need to publicly rebuff in June.

Still, there is a certain misapprehension that China’s rising economic importance to the region, both as a provider of aid and investment and market for exports, necessarily equates to strong political and strategic influence.

It doesn’t always add up that way. In January, China fractionally overtook America as the largest importer of Vietnamese goods, according to the General Department of Vietnam Customs. Nonetheless, Hanoi remains decidedly pro-US in regional affairs and that position isn’t expected to change, even if its exports to China continue to outpace those to America.

More fundamentally, China’s rising economic presence in the region is in many instances destabilizing relations. Rapid growth in Chinese investment to Malaysia in recent years prompted a public backlash, a phenomena seized on by the victorious Harapan coalition. There are incipient signs the same type of backlash is now percolating in Cambodia and Laos.

Chinese investment is likely to play a role in Indonesia’s presidential and legislative elections next year, perhaps negatively for incumbent President Joko Widodo, under whose tenure China has become the country’s third largest investor.

“The relationship with China could turn toxic for [Widodo],” Keith Loveard, senior analyst with Jakarta-based business risk firm Concord Consulting, recently told the South China Morning Post.

To be sure, China has translated some of its economic largesse to strategic advantage. Philippine President Durterte, for example, said in October 2016 that his country’s one-way security ties with the US would come to an end, though America’s provision of “technical assistance” during the Marawi City siege last year cast the extent of that into doubt.

China has also developed closer ties to the militaries of Thailand and Cambodia, so much so that the latter cancelled joint military exercises with the US last year. It has also resumed its past position of shielding Myanmar’s generals from Western condemnation during the recent Rohingya refugee crisis.

But America still remains the predominant security ally of most Southeast Asian nations, something that will only become more important as concerns about the spread of Islamic terrorism heighten. This month, Washington provided an additional US$300m in security funding to the region.

Only Laos, Cambodia and Myanmar buy more arms from China than America, according to the Stockholm International Peace Research Institute. The rest of Southeast Asia’s military procurements, sometimes exclusively, come from the US.

Still, some of China’s recent regional successes have been the result of America’s missteps. China has been greatly helped by Trump’s withdrawal of America from its long-standing leadership role in certain multilateral institutions, as well as his ad hoc policy towards Southeast Asia that favors more bilateralism.

Had Trump not withdrawn the US from the Trans-Pacific Partnership, a multilateral trade deal championed by Obama that excludes China, regional trade flows would be geared more towards America, providing an important counterbalance to many regional countries’ rising dependence on Chinese markets.

By doing so, Trump allowed Beijing’s multilateral economic institutions, like the Asian Infrastructure Investment Bank and the New Development Bank, to gain an upper hand.

Yet most reporting on China’s influence in Southeast Asia rests on the assumption that the trends of the past decade will continue into the future. But it’s not clear that Chinese investment will keep growing at the same rate – or even faster – while America continues to fumble over how best to engage with Southeast Asia.

US Secretary of State Mike Pompeo (C) poses with Thailand's Foreign Minister Don Pramudwinai (L), Vietnam's Deputy Prime Minister and Foreign Minister Pham Binh Minh (2nd L), Malaysia's Foreign Minister Saifuddin Abdullah (2nd R) and Laos Foreign Minister Saleumxay Kommasith (R) for a group photo at the 51st Association of Southeast Asian Nations (ASEAN) - US Ministerial Meeting in Singapore on August 3, 2018. Photo: AFP/Roslan Rahman

China cannot rule out that in 2021 America could have a new president able to articulate and implement a more coherent policy towards Southeast Asia, nor that upcoming elections in Indonesia and possibly even Myanmar see the rise of anti-China candidates.

Neither can Beijing rule out that India won’t become a major player in the region, despite it so far failing to live up to expectations. A recent report by the Council on Foreign Relations, a US-based think tank, asserted that it can be “a more forceful counterweight to China and hedge against a declining United States.”

Moreover, there is great uncertainty over whether the South China Sea disputes pitting China versus the Philippines, Malaysia and Vietnam, among others, might at some point turn hot, which would significantly alter the region’s security approach in place since the 1990s.

China’s growing trade war with the US could also impact on its relations with the region. Some believe China could soon devalue its currency in response to the US-China trade war, though Beijing says it won’t.

Not only would a devalued renminbi make Chinese-made products cheaper, negatively affecting competing Southeast Asian exporters, it would also affect the region’s supply chains as Chinese buyers would be expected to demand cheaper prices. Few, if any, in the region would win from rounds of competitive currency devaluations.

But viewing China’s power in the region vis-a-vis America’s is only part of the picture. Japan, and to a lesser extent South Korea, are also major players and potential counterweights to China.

Since the 2000s, Japan’s infrastructure investment in the region has been worth US$230 billion, while China’s was about US$155 billion, according to recent BMI Research, an economic research outfit. The balance might tip in China’s favor with the US$1 trillion Belt and Road Initiative, but probably not for another decade or so, BMI projects.

Tokyo rarely boasts of its own soft power in Southeast Asia. Indeed, while Philippine leader Duterte’s overtures to China are among his major talking points, quietly it has been Japan, not China, that is funding his government’s ballyhooed major infrastructure programs.

Japan's Prime Minister Shinzo Abe (R) and Malaysia's Prime Minister Mahathir Mohamad shake hands during joint press remarks at Abe's official residence in Tokyo on June 12, 2018. / AFP PHOTO / POOL / Toshifumi KITAMURA

Japanese diplomacy towards the region falls somewhere between China and America’s. While Washington’s, at least past, insistence on human rights and democracy-building puts off to many regional countries, Beijing’s diplomacy is more laissez faire, as long as Chinese interests are protected by sitting governments.

Tokyo, by contrast, tends to practice quiet sustained diplomacy, decidedly in support of rule of law but without the threat of punitive measures if a partner government strays. That is likely one reason why there is little anti-Japan sentiment in the region and why its relations receive much less public attention.

Malaysia’s Mahathir, whose first trip abroad after May’s election win was to Tokyo, not Beijing or Washington, has recently spoken of Japan’s importance in regional affairs.

Mahathir shaped Southeast Asia’s approach to great powers during his previous tenure as Prime Minister from 1981-2003, and his belief that Japan can play an even larger role in regional affairs could soon be taken up by other regional governments.

“Specific Southeast Asian states are now seeking to diversify their strategic partnerships, beyond a binary choice between Beijing and Washington,” reads a recent report by the Council on Foreign Relations.

Mahathir’s apparent desire is for a more diversified regional network, similar to the hedging policies he promoted in the 1990s. Mahathir is certainly not pro-China, but neither is he pro-US.

What most Southeast Asian nations desire is not unipolarity but competition among many foreign partners that allows them to maximize benefits and negotiating leverage. When America and China, or Japan and India, compete to gain an economic and political footing, regional nations often win through the bidding.

 

 

Australia-US convergence on the “Indo-Pacific”: AUSMIN 2018


August 30, 2018

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Asia Pacific Bulletin No. 438

Australia-US convergence on the “Indo-Pacific”: AUSMIN 2018

by Dr. David Scott

Dr. David Scott explains that “The Joint Declaration represents the convergence between Australia’s espousal of Indo-Pacific frameworks first seen in its 2013 Defense White Paper, and American espousal of “Free and Open Indo-Pacific” frameworks in the Trump administration since autumn 2017.”

Secretary of State Michael R. Pompeo and Secretary of Defense James Mattis hosted Minister for Foreign Affairs Julie Bishop and Minister for Defence Marise Payne on July 23-24 for the annual Australia-U.S. Ministerial Consultations (AUSMIN) at Stanford University’s Hoover Institution in Palo Alto, California. Holding the meeting in the San Francisco Bay Area, on the U.S. Pacific coast and near the birthplace of the ANZUS Treaty

The AUSMIN meeting held last month brought together the US Secretary of State Mike Pompeo and Secretary of Defense James Mattis with the Australian Minister for Foreign Affairs Julie Bishop and Minister for Defense Marise Payne. Its Indo-Pacific focus was unmistakable. Whereas the 2017 AUSMIN Joint Declaration mentioned the “Indo-Pacific” but once and for the first time at AUSMIN, the 2018 Joint Declaration mentioned the “Indo-Pacific” 11 times; with the “Asia-Pacific,” the previously dominant term of strategic reference, unmentioned.

Certainly other issues were noted in the 2018 AUSMIN Joint Declaration; including Russia’s role in the shooting down of Malaysian Airlines Flight MH17 in Eastern Ukraine in 2014, ensuring ISIS defeat in Syria and Iraq, and continuing anti-Taliban support of Afghanistan. However, the main focus of the Joint Declaration was the Indo-Pacific where it “emphasized both nations’ strong and deepening engagement in the Indo-Pacific” and “the significance of the Indo-Pacific to our shared future.” As such, the Joint Declaration represents the convergence between Australia’s espousal of Indo-Pacific frameworks first seen in its 2013 Defense White Paper, and American espousal of “Free and Open Indo-Pacific” frameworks in the Trump administration since autumn 2017. The Joint Declaration stressed a broad convergence, “our shared strategic interests in the Indo-Pacific, which has diplomatic, security, and economic dimensions.”

Some uncontroversial socio-economic objectives were highlighted in the Joint Declaration for application in the Indo-Pacific: “the United States and Australia decided to collaborate to reduce the threat of emerging infectious diseases in the Indo-Pacific region,” and to “reinforce objectives of Australia’s Health Security Initiative for the Indo-Pacific.”

Alongside such uncontroversial social initiatives were expressions of economic cooperation. With regard to the Pacific basin, the Joint Declaration highlighted that they “support closer cooperation to promote the security, stability, resilience, and development of Pacific Island countries”; and “highlighted the importance of strengthening regional information sharing, maritime security, and domain awareness.” This was a tacit response to China’s greater prominence in the Southern Pacific. Further economic cooperation was pinpointed:

“The Secretaries and Ministers committed to increased bilateral and multilateral cooperation on economic development in the Indo-Pacific, recognizing that security and prosperity are mutually reinforcing. Our two governments will work together, and with partners, to support principles-based and sustainable infrastructure development in the region, which will promote growth and stability.”

Though un-stated, this represented a response to China’s Maritime Silk Road (MSR) infrastructure initiative. Such responses had also been the focus of the “Trilateral Infrastructure Working Group” which brought together Japanese, Indian, and US officials in February 2018 to foster “increased connectivity in the Indo-Pacific.”

The AUSMIN meeting in July 2018 set out broad Indo-Pacific values. This echoed the “Free and Open Indo-Pacific” concept and strategy unveiled by Shinzo Abe in 2016 and adopted by Donald Trump at the APEC summit in November 2017, which has become the mantra in US strategic formulations. Hence the 2018 AUSMIN Joint Declaration that:

“They made clear their commitment to work together – and with partners – to shape an Indo-Pacific that is open, inclusive, prosperous, and rules-based […] The United States and Australia highlighted the priority each places on supporting an international rules-based order, alongside allies and partners. In the Indo-Pacific, that order has underpinned decades of stability, democracy, and prosperity.”

This was an implicit critique of China, with AUSMIN mention of other “allies and partners” pointing to strategic geometry and potential constraint of China.

In the Joint Declaration, the “open” refers to concerns of a closed Maritime Silk Road push by China, and to the (SCS) being closed down by China achieving its “U-shaped line” claim and thereby making it a Chinese Lake. The focus on “free/democracy” refers to China’s non-democratic authoritarianism. The “rules-based order” refers to China’s rejection of the SCS rulings made by the Permanent Court of Arbitration in July 2016. The SCS was prominent elsewhere in the Joint Declaration; which stressed Australia-US concerns over Chinese “militarization of disputed features” and reiterated the importance of “freedom of navigation and overflight.” This point raised the question of joint freedom of navigation operations there by the two allies – to consolidate established US unilateral naval deployments, and Australian unilateral aerial deployments. Given that bilateral Australian-UK freedom of navigation operations in the SCS are being mooted for 2019, this would be an obvious development in US-Australian defense cooperation.

The Joint Declaration “highlighted the importance of US-Australia defense cooperation in the Indo-Pacific,” with the strategic value of the US Marine Rotational Force at Darwin and enhanced air cooperation both restressed and enhanced; together with further naval cooperation where “the principals also decided to integrate US force elements into Australia’s annual Indo-Pacific Endeavour exercise.” Darwin’s importance continues to grow as a convenient jump point for deployment and operation further westwards to the Indian Ocean, further northwards to the SCS and further eastwards to the Pacific Ocean.

Wider defense cooperation was pinpointed in the Joint Declaration; “strengthening bilateral security partnerships with like-minded Indo-Pacific nations through joint training and exercise opportunities.” As to who these like-minded Indo-Pacific nations were, “they welcomed the recent US-Australia-India-Japan consultations on the Indo-Pacific in Singapore and reaffirmed their commitment to strengthen trilateral dialogue with Japan.”

The “trilateral dialogue with Japan” refers to the Australia-Japan-US (AJUS) strategic dialogue mechanism in operation since 2002; which has moved to increasingly significant air force and naval cooperation in the West Pacific and SCS, to China’s unease. The eighth AJUS ministerial meeting, due later in 2018, is expected to mark a formal shift to “Indo-Pacific” terms of reference, echoing the “Indo-Pacific” anchoring already seen in the fourth Australia-India-Japan (AIJ) trilateral, held on 21 July 2018.

The “US-Australia-India-Japan consultations on the Indo-Pacific” refers to the Quad mechanism revived in November 2017. The Quad meeting in June 2018 stressed their common push “for a free, open, and inclusive Indo-Pacific region where all countries respect sovereignty, international law, including with respect to freedom of navigation and overflight;” based on “a common commitment, founded on shared democratic values and principles, to uphold and strengthen the rules-based order in the Indo-Pacific” and to strengthen “maritime cooperation.”

The explicit message of the AUSMIN meeting was a strategic focus on the Indo-Pacific. The implicit message of much of the Joint Declaration was that, despite their stated hopes that “both nations continue to place a high priority on constructive and beneficial engagement with China,” in reality tacit counter-measures were on show.

Malaysia: Embracing Abe-san and Bro Modi


August 1, 2018

Dr. Mahathir’s Look East (Japan) and West (India) Geo-Economics–Embracing Abe San and Bro Modi

by Dr. Shankaran Nambiar, MIER

http://www.eastasiaforum.org/2018/07/13/mahathirs-foreign-policy-reset/

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Malaysian Prime Minister Dr.Mahathir greets Bro Modi

Prime Minister Mahathir Mohamad appears to be setting the tone for a revision of Malaysia’s geo-economic policy, if the bilateral meetings with his Indian and Japanese counterparts in the early days of his administration are anything to go by. 

 

Indian Prime Minister Narendra Modi called on Mahathir not too long after the latter assumed office. The meeting was significant in so far as Modi is keen on ‘Acting East’ and forging stronger ties with ASEAN. With Mahathir at the helm, Modi may well have an active and influential partner in the region.

India is likely to be an economic powerhouse in the coming decade or two, and any long-term economic architecture in the region will have to take this reality into account.

Does Mahathir run the risk of disrupting Malaysia’s economic relations with China by engaging with other partners? Not quite, but he does want to tilt the balance.

Mahathir is not questioning China’s intention to build friendly, harmonious and prosperous relations with the region or with Malaysia. But he is adding a dose of reality to some of the more questionable investment agreements that Malaysia has entered into with China and wants these deals to be reviewed. Mahathir has said that ‘we will be friendly to China but we don’t want to be indebted to China’.

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With Ali Baba’s Jack Ma of China

The Prime Minister is keen to do business with anyone who means business, provided there are no hidden caveats and Malaysia is not compromised. If there was any question of wanting to cut off China, Mahathir would not have met with Chinese entrepreneur Jack Ma.

This brings us to Mahathir’s meeting with a second foreign leader, Japanese Prime Minister Shinzo Abe. Why did Mahathir choose to go to Japan on his first official overseas trip soon after he came to power?

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Teaming with Abe-San on Look East Partnership with No.7 Jersey

Mahathir probably sees value in reviving his ‘Look East’ policy, which he pursued while prime minister in the 1980s, perhaps in a different form and for slightly different reasons. There is an element of nostalgia, to be sure. But Mahathir is not is not a sentimentalist.

The previous Najib administration did not treat the notion of equidistance from global superpowers with the sensitivity it deserved. There was a tumbling over to China coupled with a reticence to engage with Japan, at least with nothing of the enthusiasm that Tokyo enjoyed during the Mahathir 1.0 era.

Mahathir has always believed in maintaining equidistance from other powers, preferring to work with the larger economies as equals. Mahathir would, by logical extension, be willing to cooperate with China’s Belt and Road Initiative as long as the partnership is fair and without Beijing using Malaysia as its playground. In that respect, reaffirming Malaysia’s long friendship with Japan is a reassertion of Mahathir’s pragmatic approach to geo-economic policy.

But equidistance is not possible without the existence of something like the Non-Aligned Movement. In lieu of that, Mahathir will likely pursue equidistance through a more integrated ASEAN in partnership with other countries such as the United States, China, Japan, South Korea, India and the Central Asian states. This would be a revival of his East Asian Economic Caucus (EAEC) concept.

A close-knit ASEAN, through the EAEC, would be able to give countries such as Malaysia more access to foreign markets without having to pay an onerous price for doing so. It would allow countries like India to trade and invest in Southeast Asia or other places while being able to show their home constituencies that they can make gains without paying for them with tough commitments.

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Strengthening ASEAN’s economic cohesion and including other powers through the EAEC would mean that neither the United States nor China could dominate Malaysia’s foreign policy. Malaysia would not have to choose between aligning with either power.

Mahathir’s discussion with Jack Ma after his India and Japan meetings shows the Prime Minister’s pragmatism — more than being caught up in great power politics, Mahathir wants to push ahead with attracting no-strings-attached investment, be it from China, India or any other part of the world.

Mahathir understands that trade and investment are Malaysia’s lifeblood. Improving Malaysia’s networks with the rest of the world’s markets must take top priority to foster better trade and investment connections.

Mahathir’s meetings with Modi and Abe will set in motion a couple of initiatives. Malaysia will return to its default position of maintaining equidistance between superpowers. Japan will not feel it is being edged out of Malaysia’s investment landscape.

Malaysia will stand for a free and unaligned ASEAN, with Mahathir leading a campaign for a new trade architecture that might be more palatable to Southeast Asian countries  and which will minimise the conflicting demands of China, the United States and India by embracing Japan.

Of course, the EAEC idea will have its share of detractors and non-adherents. Much as Mahathir has a tough job setting domestic affairs right now, he has the no less difficult task of realigning the country’s geo-economic policy.

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Shankaran Nambiar is a senior research fellow at the Malaysian Institute of Economic Research.

A version of this article originally appeared here in The Sun Daily.

The Domestic Political Impact of Rapid Economic Change in the Indo-Pacific Region


July 25, 2018

The Domestic Political Impact of Rapid Economic Change in the Indo-Pacific Region

by Ellen Frost

Asia Pacific Bulletin, No. 426

Publisher: Washington, DC: East-West Center
Available From: July 11, 2018
Publication Date: July 11, 2018
Binding: Electronic
Pages: 2
Free Download: PDF

 

Ellen L. Frost, Senior Advisor and Fellow at the East-West Center in Washington, explains that “A key question is whether the strategies employed by current Indo-Pacific governments are working well enough to be both competitive in the new regional economic environment and responsive to legitimate grievances at home.”

 Structural changes in the external economic environment have a profound and complex impact on the distribution of power and wealth among and within national societies. They mobilize new actors, influence the content of domestic and foreign economic policies, and ultimately contribute to–or erode—the legitimacy of national governments.

Nowhere in the world are these impacts more visible and more dynamic than in the nations of the Indo-Pacific, many of which will hold elections within the next year. These challenges are not new, but they have intensified. Beginning in the 1980s, the revolution in communications technology and the advent of large-scale container shipping swept across East and Southeast Asia, connecting people and markets as never before. In the 1990s, burgeoning production networks linked the more competitive and investment-friendly developing economies—such as Singapore, Thailand, Malaysia, South Korea, and Taiwan—with world markets, leaving more closed economies such as Laos, Myanmar, and India lagging behind. Market-opening in China fueled spectacular rates of growth, lifted millions out of poverty, and enabled the country to become not only an assembly nexus and production hub but also an assertive regional power.

Regional economic integration has become a dominant feature of today’s Indo-Pacific. All governments are committed to promoting closer economic ties with each other, whether half-heartedly or not. Integration is inching along, gingerly encouraged by governments but driven more powerfully by pressure from the private sector and from ocean-facing local governments. Trade-liberalizing agreements, though imperfect and limited, are the new norm. Negotiations spearheaded by the Association of South East Asian Nations (ASEAN) have made some progress. Despite the Asian financial crisis of 1997-98 and the U.S.-origin global recession of 2008-09, no government in the Indo-Pacific region has rejected the rules embodied in the World Trade Organization (WTO) or retreated from its slow and uneven march toward more open markets.

Indo-Pacific governments that signed on to the high-standard Trans-Pacific Partnership (TPP) agreement—Brunei, Singapore, Malaysia, Vietnam, Australia, and New Zealand—remain committed  to improving the protection of intellectual property and tackling other behind-the-border measures that impede trade and investment, with or without the United States. Promoting the transition to a digital economy is likely to gain more prominence next year, when Thailand takes over the chairmanship of ASEAN. Meanwhile, negotiations on a less demanding, ASEAN-sponsored Regional Comprehensive Economic Partnership (RCEP), which includes India as well as Australia, and New Zealand, continue to inch along.

Even India has embraced closer integration, as emphasized most recently by Prime Minister Modi at the June 2018 Shangri-La Dialogue. India’s economic reform is lagging, but its high growth rate, relatively low level of public debt, and youthful population have attracted an upsurge in foreign investment. The Modi government’s outward-looking strategic awakening is gradually improving relations with nations bordering the Bay of Bengal and the Indian Ocean littoral, thus facilitating closer integration. But the combination of India’s federal system, local politics, corruption, and remnants of the “license raj” has thus far thwarted wide-ranging economic liberalization.

Domestic Aspects of Regional Integration

The upsurge in Indo-Pacific economic integration has spawned a rising middle class whose members have embraced the choices available in the regional (and global) marketplace. Urban dwellers in particular have become used to higher standards of living, more consumer choice, and a wide spectrum of social media. Thousands of Asians have found employment in foreign firms or joint ventures, while others have lost their jobs. What Karl Marx and others called the “comprador bourgeoisie”—local agents or managers working for foreign entities—has emerged as an educated political class with a major stake in regional integration.

Many provincial and urban authorities have developed close ties to their nearby counterparts across borders, particularly in mainland Southeast Asian countries bordering on or close to China (Myanmar, Laos, Vietnam, and Thailand). Small- and medium-size companies and local enterprises account for a growing share of China’s overseas investment. All of these groups have acquired a stronger political voice.

China    

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Overshadowing all this activity is the sheer weight of China. China’s economic growth and central role in production networks have made it the number-one or number-two trading partner of virtually all countries in the East and Southeast Asia regions. Some smaller nations have found a niche in China-centered manufacturing networks, while others have boosted their sale of commodities and raw materials. China’s Belt and Road Initiative and the China-sponsored Asian Infrastructure Investment Bank will spur badly needed development of Indo-Pacific infrastructure and connectivity. Local interest groups have sprung up accordingly. For all of these reasons, most Indo-Pacific governments feel compelled to maintain friendly relations with China.

Dependence on China comes at a price, however. Huge loans for infrastructure projects can feed large-scale corruption and saddle poorer countries with unsustainable debt. To enforce its geopolitical agenda, Beijing is increasingly resorting to coercive economic statecraft (“sharp power”), including surprise “inspections” and delayed approvals, selective boycotts, and limits on tourism. Chinese companies investing in Indo-Pacific countries typically import large groups of Chinese workers to perform jobs that might otherwise go to local laborers. The militarization of islands claimed or created in the South China Sea has gone unchecked, spurring criticism in rival claimants.

Challenges Facing Indo-Pacific Governments

“Governments that fail to reform the structure of their economies risk falling even further behind in the regional marketplace, but those who neglect their most vulnerable citizens may be voted out of office—or overthrown.” –Ellen Frost

A number of major threats to integration, growth, and political stability in the Indo-Pacific region are beyond national governments’ control. They include financial volatility, cyber crime, terrorist attacks, refugee flows, fluctuating commodity prices, rising sea levels, severe storms, and other natural disasters. Grievances and conspiracy theories proliferate via social media. Manufacturing breakthroughs such as 3-D printing may localize or otherwise shrink the regional supply chains in which many Asians have found a profitable niche. Growing income inequality is also a threat; when those left behind come from a neglected or persecuted ethnic or religious group, the result can be highly destabilizing.

The latest threat to Indo-Pacific prosperity—and indirectly to regional integration—is the outbreak of protectionism and populist nationalism in the United States. The Trump administration’s “America First” campaign may well divert investment away from the Indo-Pacific and into the United States. Indeed, that is an explicit U.S. policy goal. As regional integration stalls, domestic interest groups with a stake in the expanding regional economy and others with previously high expectations may turn against established governments.

Electoral Prospects: Finding a Balance

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Upcoming elections in Bangladesh, Bhutan, Cambodia, the Philippines, Indonesia, Thailand and India (including Indian states), scheduled for 2018 or 2019, will put the leaders of these countries to the test. Governments not facing challenges from the ballot box will feel pressure from their citizens as well. Some of the likely issues will be linked to or exacerbated by the evolving external economic environment, such as large-scale corruption in the infrastructure sector, widening income gaps, unwelcome Chinese activities, and worker layoffs in non-competitive sectors.

A key question is whether the strategies employed by existing Indo-Pacific governments are working well enough to be both competitive in the new regional economic environment and responsive to legitimate grievances at home. Governments that fail to reform the structure of their economies risk falling even further behind in the regional marketplace, but those who neglect their most vulnerable citizens may be voted out of office—or overthrown.

https://www.eastwestcenter.org/publications/the-domestic-political-impact-rapid-economic-change-in-the-indo-pacific-region

Foreign Affairs: Time for East Asia


July 9, 2018

Time for East Asia

By Bunn Nagara@www,thestar.com.my

READ : https://asia.nikkei.com/Spotlight/The-Future-of-Asia-2018/Mahathir-revives-Look-East-policy-to-join-ranks-of-economic-giants

AS an indication of how out of touch some international pundits of Asia are, they still call North-East Asia (China, Japan and Korea) “East Asia.”

East Asia as a region comprises the sub-regions of North-East Asia and South-East Asia, the latter being the countries of ASEAN and Timor-Leste.

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The ASEAN region developed steadily with peace and prosperity as its watchwords. It became known as a region consistently posting some of the highest growth rates in the world.

Yet ASEAN and its member countries were severely constrained by a lack of economic weight and global reach.

ASEAN’s diplomatic clout is fine, but South-East Asia as a region falls short of economic heft in a rapidly globalising world. Nonetheless, the forces of globalisation themselves would take care of that with growing economic integration within East Asia.

North-East Asia included two of the world’s three largest economies, so as a region it had no problems of limited reach or heft. Despite global constraints, China on the whole continued to grow.

As the economies of North-East Asia and South-East Asia grew more integrated, growth in East Asia as a whole would soon reach an altogether different plane.

Studies generally find intra-regional trade surpassing foreign direct investment (FDI). A 2009 study found that tariff reductions as well as closer monetary cooperation among East Asian countries made sense.

A report by the Asian Development Bank Institute last year acknowledged the impressive growth of East Asia’s intra-regional trade ratio over the past 55 years.

It noted how trade had become “more functionally linked to international production networks and supply chains” as well as FDI in the region. This is indicative of East Asia’s deepening regionalisation. Typically, after Japan’s export of capital to South-East Asia in the 1970s and 1980s, China took up the slack as Japan’s economy leveled off from the early 1990s.

In 1990, ISIS Malaysia and Prime Minister Tun (then Datuk Seri) Dr. Mahathir Mohamad worked on a proposal for an East Asia Economic Grouping (EAEG). It was time for East Asia to come into its own.

When Chinese Premier Li Peng visited Kuala Lumpur in December 1990, Dr Mahathir proposed the EAEG to him. Li Peng accepted and supported it.

The idea had not been discussed within ASEAN before. Indonesia, the biggest country and economy regarding itself the region’s “big brother,” felt miffed that it had not been consulted about the plan.

Singapore’s position, traditionally more aligned to a US that was not “included” in the East Asia proposal, was slightly more nuanced. Lee Kuan Yew, upon becoming Senior Minister just the month before – and on the cusp of the Cold War’s demise – still preferred an economic universe defined by the West.

At the time this was the European community and the Uruguay Round as an outgrowth of the General Agreement on Tariffs and Trade (GATT).

It was still three years before the European Union (EU), and four years before the North American Free Trade Agreement (NAFTA).

Generally the world was still beholden to Western economic paradigms and game plans. The EAEG was thus seen as the work of some upstart Asians, in turns brash and occasionally recalcitrant.

Most of the six ASEAN countries, like South Korea, accepted the EAEG even as they tried to learn more about it. But it was still at best tentative.

The EAEG’s critics, however, proved more vocal. US President G.H.W Bush and Secretary of State James Baker wanted to crash the regional party by becoming a member also, or else would see the idea crash.

The Uruguay Round was then seen to be quite rudderless, and APEC, itself formed just one year before, appeared fumbling in the doldrums.

The EAEG, misperceived as an “alternative”, would be thinking and acting outside the box. An energised Asia owing nothing to Western patronage was far too much for an Occidental-conceived world order to contemplate, much less accept.

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Prime Minister Hun Sen and China’s President Xi Jinping

Malaysia tried to soothe anxieties about the EAEG by emphasising its soft regionalism. It was to be only “a loose, consultative” grouping and no more.

Why should a booming, rapidly integrating East Asia be deprived of a regional economic identity, when Europe and North America could develop their own?

Unfortunately the EAEG’s public relations campaign proved too little too late. The idea, albeit now conceived as an ASEAN project, lacked traction and ground to a halt.

Singapore saw its merits and tried a different tack. Prime Minister Goh Chok Tong proposed an East Asia Economic Caucus (EAEC) within APEC, allaying fears of an insecure US that this would remain within the ambit of a US-dominated APEC.

Several political speeches and conference papers later, the EAEC idea also failed to germinate. A Bill Clinton Presidency was lukewarm-to-cool to the idea, still without the encouragement Japan needed for a nod.

A flourishing East Asia would be left without a regional organisation of its own, again.

In 1997 the devastating Asian economic and financial crisis struck, hitting South Korea, Thailand and Indonesia particularly badly. If the EAEG had been in place by then, greater regional cooperation and coordination would have helped cushion the shocks.

Suddenly, South Korea took the initiative to push East Asia into forming a regional identity: ASEAN Plus Three (APT). This grouping would consist of the same EAEG countries.

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Indo- Pacific Partnership –An Alternative to China’s One Belt One Road Initiative (BRI)

Japan this time was more accommodating, and the APT was born.

For decades, “the West” led by the US was identified with open markets and free trade. But now a Trump Presidency deemed protectionist, even isolationist, is hauling up the drawbridge and raising the barricades with tariffs and other restrictive measures.

These are aimed at allies and rivals alike, whether in Europe or Asia. Equivalent countermeasures have been launched, and the trade-restraining spiral winds on.

China, by now identified globally as a champion of open markets and free trade, has called on Europe to form a common front. Strategic competitors are making for strange trade bedfellows and vice-versa.

Dr Mahathir was on his annual visit to Tokyo last month for the Nikkei International Conference on the Future of Asia. He duly revisited the idea of an East Asian economic identity and community.

For emphasis, he added that he preferred this to a revised Trans-Pacific Partnership that the US has now rejected. How would an EAEG now play in today’s Japan and East Asia? More to the point, how would it play in Washington? The answer may still determine its prospects in Tokyo and East Asia as a whole.

It is possible that the US has become too tied to the idea of battling trade skirmishes, if not outright trade wars, with any presumed adversary to have time to frown on an EAEG.

Dr Mahathir has noted how this is the time for such a regional grouping, since we still need it and particularly when the US is helping to justify it. It is also conceivable that Japan today is more open to the EAEG, just like with the APT post-1997.

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America First Fallacy– In fact it is US retreat from global engagement

 

The more the rhetoric of a US-China trade war rages, the more likely East Asia can finally develop a regional economic identity of its own.

Even a US-EU trade conflict will do. East Asia should not be too choosy about its benefactors.

Bunn Nagara is a Senior Fellow at the Institute of Strategic and International Studies (ISIS) Malaysia.

Bunn Nagara